Rising household wealth at odds with Trump’s election message of economic gloom
Household incomes in the US surged for a second year running in 2016 and poverty declined, defying the narrative of unrelenting economic decay that hung over the presidential election campaign last year.
Median income rose by an inflation-adjusted 3.2 per cent from 2015 to 2016 to $59,039, surpassing the previous peak in 1999, according to Census Bureau numbers. Non-Hispanic white, black and Hispanic-origin households all experienced income gains. Meanwhile the number of people in poverty fell by 2.5m over the same period.
In his January inauguration speech Donald Trump said he was taking over the presidency following a period of “American carnage”, and he vowed to restore the fortunes of the country’s middle class. Tuesday’s data suggest, however, that while the longer-term story of stagnation is a genuine one for large swaths of the US population, there was a sharp turnround in post-inflation income growth in the final years of Barack Obama’s presidency.
“If you look at 2015 and 2016 things are looking reasonably healthy,” said Michael Strain of the American Enterprise Institute. “That is not to say that if you look at the arc of the last 20 years we don’t have some pretty serious longer-term structural challenges to deal with.”
Methodological changes by the Census Bureau make it harder to draw direct comparisons with figures before 2013, but the numbers suggest many households have been able to claw back the losses sustained during the recession thanks to a jobs recovery that pushed unemployment below 5 per cent last year. Since 2014, median household income has increased 8.5 per cent in real terms, or $4,600. That means the typical household’s income rose more from 2014 to 2016 than in any other two-year period going back to the 1960s, according to the Center on Budget and Policy Priorities.
Median incomes grew 2 per cent among non-Hispanic whites, 5.7 per cent among blacks and 4.3 per cent among Hispanics between 2015 and 2016. Asian-American households had the highest median income in 2016, and saw growth of 4.2 per cent on the previous year.
Separate figures on Tuesday showed job openings were at a record high in July, suggesting the labour market continues to strengthen. The overall economic recovery is now the third longest on record, although growth has remained relatively tepid.
Justin Wolfers, a professor at the University of Michigan, cautioned that the broader picture remained a skewed one, in which the rich have continued to enjoy outsize gains. “So much of the action is what is going on at the top end,” he said. The Census Bureau reported no statistically significant changes in income inequality across a range of measures.
That said, the figures revealed the poverty rate in America fell to 12.7 per cent, only a little above the level of 12.5 per cent just before the financial crisis struck. That left 40.6m Americans in poverty last year. And the percentage of people without health insurance coverage fell to 8.8 per cent from 9.1 per cent in 2015. That still means there were 28.1m Americans without health insurance over the period.